Information exchange through secret vertical contracts

Jihwan Do, Nicolás Riquelme*

*Autor correspondiente de este trabajo

Producción científica: Contribución a una revistaArtículorevisión exhaustiva

Resumen

We study a common agency problem in which two downstream firms, who are local monopolists and receive private demand signals, offer secret menus of two-part tariff contracts to their common supplier. While direct communication is not possible, they may still exchange their information through signal-contingent menus of vertical contracts. We show that a perfect Bayesian equilibrium exists in which information is transmitted, and downstream firms obtain nearly the first-best industry surplus. The use of both fixed charges and slotting fees is necessary for such a result. Our analysis provides a novel explanation for the use of slotting fees in vertical contracting based on its value as an information transmission device.

Idioma originalInglés
PublicaciónEconomic Theory
DOI
EstadoAceptada/en prensa - 2023

Nota bibliográfica

Publisher Copyright:
© 2023, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.

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